[Federal Register Volume 63, Number 131 (Thursday, July 9, 1998)]
[Notices]
[Pages 37159-37160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18150]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40152; File No. SR-CHX-98-14]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the Chicago Stock Exchange, 
Inc. Relating to Exempt Credit by Market Makers

July 1, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 10, 1998, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to clarify an interpretation to Article 
XXXIV, Rule 16 of CHX's Rules relating to registered market makers' 
utilization of exempt credit.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the CHX included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to clarify an 
interpretation to the Exchange's rules regarding market makers and 
exempt credit. The Exchange recently modified Interpretation .01 to 
Article XXXIV, Rule 16, to eliminate a reference to ``creating or 
increasing a position,'' thereby including all transactions consummated 
on the Exchange or sent from the Exchange floor via ITS in determining 
a market makers' ability to use exempt credit.\3\
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 40016 (May 20, 1998), 63 
FR 29276 (May 28, 1998).
---------------------------------------------------------------------------

    In making such a change to the interpretation, the Exchange did not 
intend to eliminate the requirement that volume be measured on an issue 
by issue basis. To eliminate any possibility that the change may be 
misinterpreted in that manner, the Exchange is clarifying the language 
of the interpretation to make it clear that volume is measured for a 
particular issue to determine a market makers' ability to use exempt 
credit for that issue. The text of the proposed rule change is as 
follows:
    Additions are italicized.

ARTICLE XXXIV

Registered Market Makers--Equity Floor

Regulatory Status

    RULE 16. No text change.
    * * *Interpretations and Policies:
    .01  Utilization of Exempt Credit. Exchange Members registered as 
equity market makers are members registered as specialists for purposes 
of the Securities Exchange Act of 1934 and as such are entitled to 
obtain exempt credit for financing their market maker transactions. 
Members and/or prospective members who are anticipating becoming 
registered as equity market makers as well as those clearing firms who 
are or will be carrying the accounts of market makers should be aware 
of the following interpretation relative to the use of such credit:
    1. Only those transactions initiated on the Exchange Floor qualify 
as market maker transactions. This restriction prohibits the use of 
exempt credit where market maker orders are routed to the Floor from 
locations off the Floor.

[[Page 37160]]

    2. Fifty percent (50%) of the quarterly share volume in an issue in 
a market maker account must result from transactions which are either 
consummated on the Exchange or sent from the Exchange Floor for 
execution in another market via ITS in order for the market maker to be 
entitled to exempt credit for such issue.
    3. Only those positions which have been established as a direct 
result of bonafide equity market maker activity qualify for exempt 
credit treatment. This restriction precludes exempt credit financing 
based on an equity market maker registration for positions resulting 
from options exercises and assignments.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b)(5) of the 
Act \4\ in that it is designed to promote just and equitable principles 
of trade, to remove impediments to and perfect the mechanism of a free 
and open market and a national market system, and, in general, to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition.

(c) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received from Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Because the foregoing rule change constitutes a stated policy, 
practice or interpretation with respect to the meaning, administration, 
or enforcement of an existing rule of the Exchange it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \5\ and Rule 19b-
4(e)(1) \6\ thereunder.\7\ At any time within 60 days of the filing of 
such rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(e).
    \7\ In reviewing the proposal, the Commission considered its 
impact on efficiency, competition and capital formation. 15 U.S.C. 
78f(b).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Copies of the submissions, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. Sec. 552, will be available for inspection and copying at 
the Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the CHX. All 
submissions should refer to File No. SR-CHX-98-14 and should be 
submitted by July 30, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-18150 Filed 7-8-98; 8:45 am]
BILLING CODE 8010-01-M